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holding company’s own failed subsidiary can now accuse the holding company’s

directors of a breach of fiduciary duty. To sanction such a bizarre scenario would

undermine the wealth-creating utility of the business judgment rule.

As untenable is the Litigation Trust’s attempt to hold the former directors of the

U.S. subsidiary liable for causing the subsidiary to support the holding company’s

business strategy. Again, the Litigation Trust fails to plead any facts suggesting a

disloyal motive on the part of these former directors. In fact, the motive the Litigation

Trust points to does not create an inference that these directors would have wished the

subsidiary to become insolvent. Each of them owed his livelihood to the subsidiary.

Why would they have wished to put their jobs in jeopardy purposely by hazarding


Likewise, the complaint fails to plead facts suggesting that the subsidiary directors

were less than diligent or misunderstood their roles. A wholly-owned subsidiary is to be

operated for the benefit of its parent. A subsidiary board is entitled to support a parent’s

business strategy unless it believes pursuit of that strategy will cause the subsidiary to

violate its legal obligations. Nor does a subsidiary board have to replicate the

deliberative process of its parent’s board when taking action in aid of its parent’s

acquisition strategies.

In the complaint, the Litigation Trust also has attempted to state a claim against

the former subsidiary directors for “deepening insolvency.” As noted, however, the

complaint fails to plead facts supporting an inference that the subsidiary was insolvent

before or immediately after the challenged transactions. Equally important, however, is


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